Building Capitalization Rate

Definition of "Building capitalization rate"

Valerie Dirks real estate agent

Written by

Valerie Dirkselite badge icon

Keller Williams Realty

Rate of return of capital invested in building improvements. Is segregated from land investments and provides a method of separating property income streams between improvement and land investments. Normally the yield is stated as an annual rate of profit per dollar of investment. Three factors are necessary in order to correctly compute the building capitalization rate: (1) The amount of the investment. (2) The size and duration of the income stream. (3) The eventual resale proceeds.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

The profit or loss from selling an investment that is held one year or less. Short-term gains are ordinary income, while short-term losses are deducted from current income. Short-term gains ...

An anticipatory breach of contract is the action that occurs when one party in the contract shows their intention to not fulfill their contractual obligations to the other party. The ...

Money and nonmonetary consideration given to employees for work performed. The reward will typically be increased the better the job is done. Salary and fringe benefits are a major cost of ...

The definition of involuntary alienation in real estate is the loss of property through attachment, condemnation, foreclosure, sale for taxes or other involuntary transfer of title. ...

Bank modifies the borrower's mortgage obligation, such as when the bank approves the homeowner's request for an extension of time to pay because of illness or loss of a job. One's ...

Transfer of title based on a preceding title transfer of conveyance. A derivative conveyance increases, ratifies, moderates, renews or transfers the stake created by the original ...

Homes with division of ownership or use of a resort unit on the basis of time periods. For example, a resort home may be divided into 25 time shares of two weeks each, with two weeks left ...

Any permanent development that has been made to a parcel of land. Improved land features include whether the land has fruit bearing trees or crops producer by labor, landscaping, or ...

Also known as “cap rate” or “income yield”, Capitalization Rate is a useful way to compute the rate of return on a real estate investment. It is commonly used in the ...

Popular Real Estate Questions